November 10, 2021

How to Secure and Use a Home-Based Business Loan

In addition to being an added safety measure, working from home can provide business owners with notable benefits including independence, decreased real estate costs, and increased efficiency. However, working from home also presents a unique array of challenges. Even if your business is home-based, you may require additional funding so that you can afford necessary costs. Fortunately, you can secure a loan for your home-based business to improve your operations. In this post, we’ll explain how to select and spend a home-based business loan.

Top Home Based Business Loan Options

If you're interested in securing additional working capital for your home business, you may feel overwhelmed by the many types of financing there are to choose from. Before applying, you should educate yourself on your funding options to ensure you select the best option. Below, you'll find a list financing options that home business owners should consider:

1. Small Business Loans

Often, home based business owners pursue business loans from reputable alternative lenders. These lenders don't limit how you can use your funds, so you'll be able to spend your loan however you see fit. Although banks also provide business loans, they typically have stricter requirements. New call-to-action

2. Lines of Credit

If you want a credit line that you can borrow against when you require funds, you should research line of credit options.

3. Business Credit Cards

Many business owners turn to credit cards in order to make purchases. Although credit cards are a convenient funding option, it's crucial that you make your monthly payments and avoid overspending. If you don't have the best track record with budgeting, a credit card may not be the best funding option for you.

4. Small Business Administration (SBA) Loans

If you can't secure traditional financing methods, consider applying for an SBA loan. The SBA has loan programs, such as the SBA 504 loan, SBA 7(a) loan, and SBA microloan.

5. Loans from Family Members or Friends

If you run a startup or can't qualify for traditional funding options, you could ask a loved one for a loan. Although you may know people who are interested in helping you grow your business, you should consider the downsides of borrowing money from them. If you aren't able to repay them, it may create an awkward situation.

How to Use a Home- Based Business Loan

Every business's financial situation is different, so you should review your business plan prior to deciding on how to use a loan. Below, we'll provide a few popular examples of how you can utilize a loan to grow your home based business.

1. Pay for Marketing Expenses

Many businesses – particularly startups – can't invest in marketing projects until they start generating consistent sales. However, they also can't increase revenue until they’ve invested in marketing. By taking out a business loan, you can bridge cash flow gaps and make necessary marketing investments! There are many different ways to use your loan to market your at-home business, including:
  • Sponsored social media posts
  • Online advertisements targeted to a specific audience
  • Search engine optimized (SEO) content
  • Direct mail marketing
  • Email marketing

2. Hire Employees

Did you know that nearly half of all Americans are employed by small businesses? These enterprises are often started in a single household and expand over time. As your business continues to grow and attract new clients, you'll inevitably need to hire more employees to meet increased demand. The number of employees that’s right for your business will depend on your long-term goals and short-term financial constraints. Many small business owners prefer to outsource certain tasks such as accounting, marketing, and website development. By using your loan to outsource certain tasks, you can focus on the aspects of your business that you do best.

3. Invest in Equipment 

For your business to be competitive, it’s important to invest in high quality equipment. Just like paying for marketing costs, many businesses need to purchase necessary equipment before they’re able to increase revenue streams. Due to this, applying for a business loan to make necessary investments may be in your business’ best interest. Investing in new computers and software is often something that’ll help earn you earn a very quick return. In addition, if your business produces tangible goods such as jewelry, clothing, and furniture, having updated equipment is usually crucial.

4. Upgrade Technology

When working from home, it's crucial that you and your employees have reliable technology in place. If you use outdated programs, you'll risk losing valuable customers. Due to this, it may be prudent to use your loan to make technology investments.

5. Have Additional Cash Flow

Many home based business owners struggle with cash flow shortages, especially when funds are tied up in accounts receivable. Once you take out a cash flow loan, you can rest easy knowing that you have enough funds on-hand to continue running your home-based business.

Conclusion: Invest in Your Home Based Business

Now that you've read this post, find a reputable lender and select a funding option that fits your needs. After you receive a loan, you can make necessary investments and focus on growing your home business!
Editor’s Note: This post was updated for accuracy and comprehensiveness in November 2021.